If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise.

Question

Quizplus · Accepted Answer

If total planned expenditures exceed real GDP, it would indicate that there is strong demand for goods and services, which would typically lead to an expansion of the economy rather than a contraction. If production of goods and services decreases, it would likely be due to other factors, such as a decrease in demand or an increase in input costs. Unplanned inventories may rise if businesses are not able to sell all their output, but this would not necessarily lead to an overall contraction of the economy.

If Total Planned Expenditures Exceed Real GDP, the Economy Will